A SYSTEM DYNAMICS DECISION MODEL FOR MINING INVESTMENTS

Date

2024-8-29

Author

GÖKÇE, BERK

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Emerging markets represent a dynamic and rapidly evolving segment of the global economy, distinguished by significant growth potential and increased investment opportunities. These markets are undergoing substantial economic transformations, including industrialization, urbanization, and advancements in infrastructure. This thesis study aims to develop a mining investment decision model that considers the principal drivers and challenges associated, especially with emerging markets, such as political instability, regulatory environments, and market volatility, particularly concerning mining investment decisions, through system dynamics. The study uses system dynamics modeling with stock-and-flow diagrams to reveal the nonlinear relationships that influence the interplay between investment decision-making and emerging markets. The simulation model incorporates data from literature, official reports, and expert opinions to develop dependencies between positively and negatively correlated factors and their impact on investment decisions. The study's main objective is to identify key leverage points within the decision system by examining endogenous and exogenous parameters, thereby offering valuable insights for investment decision-making in the mining industry within emerging markets. The model utilizes five key submodules: Valuation, production, growth strategy, demand, and finance. Through a structured methodology involving system decomposition, case studies, and sensitivity analyses, the model is calibrated to simulate a hypothetical copper mine investment, estimating an enterprise value of 78.9 million USD and a target growth rate of 11.2%. Results highlight the significant influence of operating costs, capital management policies, and market conditions on free cash flow and mineral reserves. Ultimately, this model offers mining investors a comprehensive tool to identify optimal investment strategies across various development stages and mineral types.

Subject Keywords

Dynamic Complexity, Mining Investment Decision Making, System Dynamics, Project Evaluation, Emerging Markets

URI

https://hdl.handle.net/11511/111366

Collections

Graduate School of Natural and Applied Sciences, Thesis